Law protects Williams' family from asset seizure

Ray Williams apologised to HIH investors when he was released from jail.

Paul Miller: AAP

The founder of HIH Insurance, Ray Williams, was released from jail this morning, about three years after being imprisoned for lying to investors about the company's financial position.

Tonight, Mr Williams is believed to be enjoying his first night of freedom in a $4 million home belonging to his wife on Sydney's north shore.

It is one of several assets he transferred to members of his family before the spectacular $5 billion collapse of HIH.

But the law prevents the company's creditors from seizing those assets.

Mr Williams was contrite and repentant when he took his first steps of freedom outside Silverwater Jail this morning.

"[The] thing to understand is that the last thing in the world I would ever have wanted was for HIH to fail, for people to be hurt and for people to suffer financial loss," he said.

"And I really am very sorry it happened to so many people.

"So if I can just leave it at that, I really would like to get home and spend some time with my family who have been so wonderfully supportive, as have our friends and even so many of the HIH staff.

"So I was really grateful for that. So if you don't mind, if we could just leave it at that, I'd really very much like to get home. Thank you."

The home that now belongs to Mr Williams' wife Rita is one of several assets that Mr Williams owned in the late 1990s. He either transferred them to his wife's name or sold them and gave his wife or other family members the proceeds.

But University of Queensland corporate law professor Larelle Chapple says that even if he had not done so, the concept of limited liability protects company directors' personal assets when a company fails.

"Even though we may talk about particular examples that seem a little bit extreme, I guess the trade-off... the benefit that everyone involved in the company aspect, whether as investor or creditor, realises [is] that there is a concept of limited liability," she said.

"The way that we encourage people to invest, in fact, the way that we encourage people to manage companies is that they do it in the understanding that their personal assets are quarantined."

Professor Chapple says that is the way it ought to be because, across the economy as a whole, it means companies are better run.

"I appreciate that there isn't a great deal of comfort for stakeholders in a collapsed corporation when they look at the lifestyles of the directors," she said.

"The point is it's meant to be a trade-off in our commercial dealings to say, the flip-side is that if you have a business you take comfort from the fact that your personal assets can be quarantined."

She says the law is meant to encourage directors and managers to be more entrepreneurial.

Assets transferred

But University of Sydney senior corporate law lecturer Saul Fridman says there are limits to limited liability.

"If [Ray Williams] is found, as he was, to be in breach of duty under the statute, the corporation and others can seek orders against him personally for damages," he said.

"Those may include compensating the company for any loss.

"But if he doesn't have any assets, it's pointless to proceed against him. And in this case it appears as though his most substantial assets were disposed of a long time ago.

"So it's theoretically possible for a civil action to proceed, but they would have to be accompanied by an attempt to invalidate those land transfers. And if that can't be done it'd be pointless to sue him."

Mr Fridman says there are rules against transferring assets to avoid personal liabilities.

"If, for example, I should transfer all of my assets to one of my children or my spouse the day after I get served with a statement of claim seeking substantial damages, it doesn't take a brain surgeon to figure out that my purpose in so doing was likely to [be to] defraud my creditors," he said.

"If you can demonstrate that a transaction was motivated in that way, both in the individual and the corporate sense, there are provisions and principles designed to uncover such things as fraudulent conveyances, and they can be set aside."

He says he believes that in Williams' case there was an attempt to do that.

"But it was demonstrated that at the time of the transaction - which is critical - Williams wasn't insolvent and there was no prospect of him becoming so, and his spouse provided good consideration in the form of a mortgage," he said.

"Now, what happens with that mortgage and whether or not whoever the mortgagee is happens to be decides to proceed against her personally for it is another question."